Icap, the world’s largest inter-dealer broker, on Tuesday offered the first glimpse of the earnings potential from its recently developed post-trade business, as Michael Spencer, chief executive, came away with a £23m pay-out from a dividend lift.
Mr Spencer, who owns a 21 per cent stake in the company and is also the Conservative party treasurer, unveiled a 9 per cent increase in the total dividend to 17.05p, via a 12.35p final, after profits rose 5 per cent.
The company reported underlying profit for the year to March of £346m – slightly beating analysts’ expectations – compared with £330m a year earlier. The result was helped by the dollar’s strength against sterling. Most of Icap’s earnings are in dollars.
Revenue rose 23 per cent to £1.6bn. Pre-tax profits were £281m (£275m). The shares closed 22½p higher at 422p.
Icap revealed that post-trade services, such as Triana and TriOptima, were its highest-margin businesses.
Post-trade services – clearing, settlement and related work – are set to gain from a regulatory push by the US administration requiring more over-the-counter derivatives to be processed through a clearing house.
Icap negotiates OTC contracts on behalf of its clients and while it does not clear such products, it has recently established ancillary businesses that deal with processes that come before clearing itself.
Mr Spencer said: “We are . . . well positioned to take advantage of the significant restructuring of the financial services industry that is taking place and the changes that will happen in our customers’ business models.”
Icap reiterated its support for moves by the US to bring greater transparency to OTC markets, which include changing US laws to allow financial regulators to impose the shifting of “standardised” trades on to regulated exchanges and “regulated transparent electronic trade execution systems”.
Key performers in the OTC markets are concerned that this could result in the wholesale movement of OTC markets to exchanges.